Business models blamed for slow insurance uptake

A shift in the business models of insurance firms has been blamed for the low uptake of their products.

Participants at the just-concluded Actuarial Society of Kenya’s (TASK) Actuarial Convention 2017 in Nairobi heard that insurers are also not keen on calculating premium charges and instead resort to using unreliable models that do not fit in the local market.

“The majority of the market is cash-based products so this is an area that is undeveloped. Some of our models are imported from South Africa and Western countries so, they just do not fit in the market,” said Centum boss James Mworia.

The first quantitative impact study on the industry released at the annual event also found that not only have the insurance companies diverted from their core business, but they have also failed to capture the impending risks in the business.

For example, in the General Insurance category, the survey by TASK indicated that an improvement and alignment with the market was needed in the models used.

Interest rate shocks

“Few participants separated their motor reserves between liability and property damage,” read the survey in part.

In this category, insurance firms surveyed did not give information on their unexpired risk reserves.

This has seen the once thriving industry grow at an even slower pace, especially in its core business.

According to the TASK report, in general insurance, about 75 per cent of the firms could not outline how they will cushion themselves in case of interest rate shock and only a few insurers calculated the impact of their exposure to currency risk. For life insurance, it was noted that risk charges for ordinary life were not calculated correctly.

“Few participants calculated mortality, expense, lapse and catastrophe risk charges,” said the report.

Currency risk charges were also missing in most cases as well as interest rate risk, which was missing for more than 50 per cent.